During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

ECRI uses a highly nuanced “many-cycles” view to understand the complex dynamics of the global economy.

To monitor the U.S. economy alone, we use an array of more than a dozen specialized leading indexes in the context of the ECRI framework for incorporating various sectors and aspects of the economy.

The ECRI framework covers 21 economies, incorporating well over 100 proprietary indexes designed to be comparable across borders.

News

Home Price Growth Downturn

ECRI monitors many cycles within the economy, and a recent development is that home price inflation is flashing red. Growth in our U.S. Leading Home Price Index, which nailed the 2006 housing bust in real-time, is now at its worst reading since 2009, when we were about to pull out of the 2007-09 recession (contact us for copies of the ’06 or ‘09 reports).

In other words, home price growth is set to fall in a sustained cyclical downturn. This is important because of the wealth effect and consumer confidence. People feel better when the stock market and their home values rise. And it’s been years since there’s been serious downside risk to both, which amounts to a more generalized risk to asset prices.

In addition to tax cuts, a lot of borrowing has been supporting growth. The combined debt of U.S., the Eurozone, Japan and China has increased more than ten times as much as their combined GDP over the past year.

It’s remarkable that the global economy – slowing in sync despite soaring debt – finds itself in a situation reminiscent of the Red Queen Effect. As the Red Queen says to Alice in Lewis Carroll’s Through the Looking Glass, “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”